Fischer: It is necessary for state, local and regional budgets to breathe with the same rhythm

Thank you, Ladies and Gentlemen, I am genuinely pleased to be invited to this, your fourth meeting. I am pleased to be here, and of course this is my first involvement in a meeting of this kind.

You are doubtless aware that one of the main tasks of the bureaucrat government, or specialists' government if you will, which is to function up to the early elections within its time and content mandate, is to handle the impact of the world economic crisis to the greatest extent possible and to the very best of its ability. Here we are fortunate that this is in the realm of the real economy, and not the field of banking or financial institutions, as is the case in a number of countries nearby in Europe. And this of course is linked to one of the fundamental priorities, that of setting a realistic budget. That is, the state budget for next year, and to behave in such a way as not to cause any serious macroeconomic difficulties and not to lead the country into rapid indebtedness, which would cause complications in itself and would render more difficult the exit, the expected exit, from the crisis. I know that this affects all of us very much. Of course we are making the greatest of efforts to economise and to make maximum use of European funds.

I trust that you understand the situation in which our country finds itself. And that it is necessary for state, local and regional budgets to breathe with the same rhythm, as they say. This means that all of us without exception must make savings. At a time of crisis this is a clear imperative. Even while making every possible saving we will of course try to maintain social benefits, to support employment and find money for essential investment and the co-financing of projects using European money. And I confirm to you that these are government priorities.

I thought it would be worthwhile to meet you and tell you a little about how I see the situation. I have come in spite of the fact that some advised me not to come, because at this meeting a clash of party ideas was to be expected, whereas my government was established along non-party lines and has no ambition to become involved in political struggles. Nevertheless it is exactly for this reason that it seems to me appropriate that a neutral opinion be heard here, indeed one I have also been asked.

One of the questions which you want answered at this meeting and which forms a kind of motto or part of the motto for this meeting: "Why are decisions on grants and citizens' wishes in our towns and villages made by civil servants and not by elected representatives?" Well you haven't made it easy for me. In truth there is no easy answer to that and what is more it doesn't fit into the few minutes of this introductory speech. That is not my ambition, nor indeed do you expect it, but it is a fact that the question of how large a part of towns and villages' budgets should be made up of completely autonomous incomes and how much from central grants and how much should be by allocation across the budget determination of taxes, is something which has actually been the subject of resolution for a full twenty years. And as far as I can judge from the information I have available, it does not seem to me that there has ever been a definitive answer in sight that would be satisfactory to everyone. This does not mean that we should not search for one, and search for it together.

It would be simplest of course if towns and regions were entirely independent and central grants for their spending set at nil, that is one of the extremes. In the centre we could then breathe a sigh of relief and not have to worry about it. This of course is bizarre because an elementary solidarity between richer and poorer communities, between richer and poorer regions, simply has to exist. It exists within the state, and it exists at the level of such a unit as the European Union. We simply cannot avoid a certain level of territorial redistribution, it is always a question not of if, but of how. As I have said once before, as far as possible with the minimum of unfairness. This is the basic principle, whether we are talking about budget tax allocation or direct grants. I leave the question of how large this redistribution should be to the representatives of the political parties. By invoking my original profession I would only permit myself the observation that the degree of transparency and fairness of this process is indirectly proportional to the volume of funds redistributed. This is a clear statistical fact. It is also just as clear that the efficiency of management and public audit is easier, the more directly citizens make decisions about money. I will grant you that, and this is also supported by improving management on the part of towns and villages. I would only add that decisions on grants are made not only by central civil servants, but also by those from the regions. So this is not just a dialogue between towns, villages and the government, but also between them and the regional governors' offices.

So what do central civil servants do? No more, and no less, than to administer, on the basis of the relevant Acts, the sum of money which is to be redistributed. This is not some kind of arbitrary behaviour on their part. On the contrary, it is their duty. Because redistribution has, must have its rules, and I am in favour of their being continually made more exact and more strict and for there being less room for subjective judgements on the part of any civil servant, either from central government, or from the regions. Public administration must be strictly neutral and on behalf of the government I can say that it most certainly will be so from our side.

And if it seems to someone that our state bureaucracy is too powerful, I do not intend to argue with that, let it be reduced. And as I mentioned in my introduction, I would certainly sleep more easily if that were the case. But any reduction in the volume of redistribution must not mean that the state's responsibility for the public finances is weakened. Indeed the reverse must be true, if we are serious about fighting corruption and protectionism. And here also I agree with you that this fight would be easier for public administration with a lower level of redistribution.

If I summarise my view of the topics tabled by you from the point of view of a Prime Minister of a government of specialists, they fit into three categories. First, I greatly value the improved management of towns and villages, which taken as a whole manage with greater responsibility, lower indebtedness and better repayment of previously incurred debts. Secondly, I have no problem in agreeing with reduced scope for subjective decision-making on the part of central civil servants, both in terms of the volume of money to be redistributed and in terms of stricter rules for its allocation. Thirdly, I do not agree with the notion that the role of the state in the actual process of distribution of public funds be weakened, because that is the state's responsibility with regard to its own citizens. My wish is that the state do this efficiently, decently, and entirely aside from political considerations.

At the very end I will return to where I began, to my introduction. To the impact of the global crisis on local authorities. Here truly and with the best will in the world I can provide you with no words to satisfy you, and clearly will not do the same for the representatives of the political parties, because there is no satisfaction to give. The draft state budget which we are presenting is very strict and very firm. Originally I began with a budget deficit of 150 bn CZK, and we now end with one of 170 bn, with a realistic view I speak of next year, so that we do not flirt with exceeding the boundary of a public spending deficit in relation to GDP of greater than 5% Of course one could adopt any number of alternatives, allow a greater deficit, a larger share of GDP, just close our eyes and wait for someone else to repay our debts in the future. This is the basic position when there is such a large share of compulsory spending such as that which exists within the structure of the Czech state budget. It is all the more difficult, but believe me that when after three very difficult debates in cabinet we agreed that in these departmental spending areas these reserves could be found, must be found, and would not lead to their paralysis, this does not mean that they will not be able to function from 1st January, this is not the case and I do not believe it. This creates really enormous pressure on the public administration to genuinely look around, and under this government the time is truly ripe for it to look around for reserves to be accessed, and where to find them. Be this in people, better management, in specific spending, in reassessing investment proposals, I confirm that we are stabilising spending on education, science and research, but also on projects which are genuinely of high quality and value. Priority is not a taboo, it is one thing, and the other thing is transport infrastructure. Ladies and gentlemen, this government has never said that construction work will cease in this country, that many projects which have been started cannot be completed. But together with the Minister of Finance I have refused to pour 20 bn. CZK into this part of the economy simply as a blank cheque. If we read the government decree for this budget, the Minister of Transport is clearly tasked with finding more economic solutions, auditing completed projects, deciding whether a project which was tendered for was the one that was actually built, to look at the costs we incur for construction in this country, and how much of this goes to the project engineering companies. This is what this is about. In cabinet we have time for this up to September, following which we will come back to it in detail. I would prefer that we did not do this ourselves in the centre, and would like to discuss this with representatives of the regions. I have my first meeting with the Regions Association next week. I believe that there is room for thorough discussion and clarification of positions in this very sensitive matter, which I am sure troubles you, so this is without doubt just an opening position.

In conclusion permit me to thank you for your attention, I ask for your understanding and wish you every success in your meeting. These truly are not simple times, we will be discussing many a controversial item. It cannot be otherwise, I do not wish to turn a deaf ear to voices from towns and villages and from the regions, and I will be listening carefully. Concerning my government, we will certainly be going into a discussion from which there will be a sensible outcome or we will at least part with a good understanding of each other and our respective positions. I wish you every success in your discussions.